President’s Clean-Up Policy For Nation’s Utilities May Mirror Automotive CAFE Rules

A White House memorandum by President Barack Obama was issued Tuesday ordering the U.S. Environmental Protection Agency (EPA) to set rules to clean up greenhouse gas emissions from the nation’s utilities.

The mandate is being viewed as following largely in the spirit of Corporate Average Fuel Economy (CAFE) mandates, and waves have been felt since the president discussed during a speech at Georgetown an unambiguous agenda and perspective on the topic of climate change.

Rules intended to reduce greenhouse gases and prevent climate change are expected to have an effect on the power providers depending on their mix of power sources from the cleanest to dirtiest. According to the Wall Street Journal, the rules will make for “winners and losers,” it said, echoing a familiar refrain levied at other Obama policies.

Having seen success with his agenda in the transportation sector for CAFE 2017-2025, the plan to clean up the nation’s utilities calls for finished rules set by the EPA for the energy production sector by June 2015, and implementation by the states by June 2016.

It’s expected the EPA rules will favor cleaner technologies just as CAFE (arguably) does, and in this case, operators of coal-fired plants will be adversely affected the most, while nuclear, natural gas, hydro, solar, wind, and even gas turbine plants will be favored.

The Journal cited analysts from Sanford Bernstein which said in a report Wednesday that a 10-percet cut in greenhouse emissions could be achieved by a 13 percent reduction in coal-fired generation assuming that nuclear power or renewables picked up the slack.

The report also said if natural gas provided the replacement power, it would require a 21-percent cut in coal-fired generation to achieve the reduction.

It’s expected also that carbon limits are not likely to raise power prices much but will make zero-emitting sources more valuable to those that need them.

Presently nuclear plants are responsible for two-third’s of America’s emissions-free electricity production. The industry is however suffering due to reduced present demand for power and high fixed costs.

“I don’t think there’s any doubt we’ve seen an improvement in the value of existing nuclear plants,” said Bill Mohl, president of Entergy Wholesale Commodities in White Plains, N.Y. after the president’s speech.

Source: The White House.

Source: The White House.

The memorandum given by Obama to the EPA suggests power producers begin cleaning up their respective portfolios along the lines of how automakers must also.

Automakers are essentially being made to add in hybrids and electric vehicles to their fleets even if they also sell gas guzzlers. The net result must be an average fuel economy rating by 2025 of “54.5 mpg” with commensurately low emissions.

Similarly power producers will not find it as rewarding to rely on coal-fired plants.
The WSJ observes companies most affected by the president’s pending rules will be those that now make their profits most heavily from coal. These include American Electric Power Co. and DTE Energy Co. which have not large numbers of nuclear plants, and NRG Energy Inc., Dynegy Inc., PPL Corp. and FirstEnergy Corp. which sell electricity on the open market.

The WSJ cited analyst Hugh Wynne of Sanford Bernstein who said likely “some sort of credit system” will be created to achieve U.S. goals that allows low-emitting resources to offset those that are more polluting.

So, instead of imposing rigid rule on each power plant, the EPA could very well allow the highest greenhouse-gas-emitting coal-fired plants as long as their operators also ran clean plants such as nuclear or renewable-powered plants.

In all, the plan is being observed as bolder push toward a progressive agenda founded on assumptions about greenhouse gas and climate change. Critics not politically or otherwise disposed to see things Obama’s way are expected to voice opposition, but the president is not asking permission at this point.

No, the White House is unambiguous on where it stands with regards to climate change, as the graphic above taken from its Plan To Fight Climate Change clearly outlines. This latest move to clean up utilities ASAP is thus a continuing forward of the big picture remedy the administration says is needed, and the Obama went so far as to take a jab at those who deny climate change.

“We don’t have time for a meeting of the Flat Earth Society,” the president said, “Sticking your head in the sand might make you feel safer, but it’s not going to save you from the coming storm.”

Wall Street Journal (subscription)